FTC Releases Guidelines Detailing Advertiser and Blogger Responsibilities in Social Media

The Federal Trade Commission (FTC) has announced revised Guides Concerning the Use of Endorsements and Testimonials in Advertising (the Guides), effective December 1, 2009. In particular, the revisions delineate how the FTC intends to apply its existing powers prohibiting deceptive and unfair business practices to nontraditional consumer-generated media, such as blogs and social networking sites, and to celebrity endorsers and advertisers using new media. These changes represent the first modifications to these FTC advertising guides since 1980.

For the first time, the Guides expressly address when consumer-generated media constitutes an "endorsement" for which an advertiser may be liable. The Guides include examples pertaining to social media, such as blogs, of when payments or free products from advertisers to bloggers or other posters fall within the Guides' prohibition of deceptive and unfair business practices. Recognizing differences between traditional and new media, the Guides state that the endorsement post of a blogger who receives cash or an in-kind payment (for example, goods or services) to review a product may be misleading, unless that payment is conspicuously disclosed. Bloggers reviewing products who do not disclose that the products reviewed were provided to them at no cost may find themselves running afoul of the Guides. While not directly referencing the use of Facebook, MySpace, or Twitter, the FTC rationale for bloggers' disclosures apply equally to endorsements through these other types of social media.

Likewise, advertisers may find themselves responsible for bloggers' or other posters' lack of disclosure of payments or other material facts, so long as the advertiser initiated the process by providing products to well-known bloggers or posters enrolled in marketing programs. Liability hinges on whether the advertiser chose to sponsor the content, in effect creating an endorser-sponsor relationship. The FTC states that the advertiser, by choosing the means of marketing, assumes the risk that an endorser may fail to properly disclose a material connection or misrepresent a product. Advertisers can minimize this risk by demonstrating efforts to advise bloggers/posters of their responsibilities and to monitor the online behaviors of the bloggers/posters with whom they work, presumably to ensure that the advertiser only works with bloggers/posters complying with the Guides.

The FTC does not categorically state how the relationship between bloggers/posters, on the one hand, and advertisers, on the other hand, can or should be disclosed. Rather, the Guides state only that the disclosure must be "clear and conspicuous" to be effective. Presently, bloggers/posters vary in the level and prominence of disclosures they may provide as to any relationship with advertisers of the products discussed on their blogs or other social media sites. The Guides however, now address these practices, making clear that any blog or social media references where a connection to the advertiser exists should now disclose that fact conspicuously.

The Guides also clarify that advertisers may be liable if celebrity endorsers fail to disclose material connections in circumstances where such connections may not be obvious. While consumers may assume in a traditional advertising context that a celebrity is a paid spokesperson, the Guides clarify that a celebrity must disclose a relationship with an advertiser when commenting about its products or services in other contexts, such as on talk shows or through social media. If the disclosures are not made or if claims within the celebrity's comments are false or unsubstantiated, then both the celebrity and the advertiser may be liable under the FTC Act. Here, too, the Guides charge advertisers with the responsibility of advising celebrity endorsers of their responsibilities and of monitoring their compliance to avoid a violation of the FTC Act.

Beyond social media contexts, the Guides also address the responsibilities of celebrity endorsers in traditional contexts, such as television commercials and print advertisements. The Guides make it clear that advertisers and endorsers may be liable for false or unsubstantiated endorsement claims if the studies relied on are flawed. Moreover, if an endorsement, for example, details a best-case scenario, the fact that the endorser's results are not typical results normally should be disclosed along with the generally expected performance. The Guides, however, do not rule out entirely the possibility that a strong disclaimer of typicality would suffice if an advertiser possesses reliable empirical testing establishing the adequacy of the typicality disclaimer in the marketplace.

Designed to help advertisers and others to maintain compliance with the FTC Act, the Guides are not binding law, but they do provide the FTC's current administrative interpretations as to compliance with the FTC Act. Given the new topics addressed as to social media, and the revisions as to celebrity and consumer testimonial advertisements, the FTC has sent a clear message to advertisers and endorsers, and to bloggers, posters on social media, to incorporate the revisions into their advertising policies and procedures. The FTC has long looked favorably on the existence of, and compliance with, appropriate internal policies and procedures as a means by which to mitigate liability under the FTC Act.

If you would like more information on any of the issues discussed in this LawFlash, please contact any of the following Morgan Lewis attorneys:

New York
Karen A. Butcher

San Francisco
Rochelle D. Alpert

Washington, D.C.
Michael F. Clayton
Ron N. Dreben
Anita B. Polott